Avalara Q3 Earnings: Buying Soaring NYSE:AVLR Stock Before Call?

in EARNINGS/INVESTING IDEAS by

Avalara, Inc. (NYSE:AVLR) is scheduled to report Q3 earnings results after markets close for trading on November 5, 2020.

The company is expected to report earnings of -$0.09/share on revenue of $116.3 million. The consensus earnings per share (EPS) of -$0.09/share is based on a poll of 13 analysts and represents a decline in eps of -847.6% over the same quarter last year, when the company reported earnings of -$0.01/share.

The revenue forecast of $116.3 million based on a poll of 12 analysts implies a year-over-year (YoY) growth in revenue of 18.0%. Last year the company reported $98.525 million in revenue for the quarter.

Expected to report EPS of -$0.09/share for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $116.25 $98.53 18.0%
EPS -$0.09 -$0.01 -847.6%

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters, and met expectations 1 quarter.

What are your expectations from Avalara, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 -$0.10 $0.04 139.3% Beat
Q1, 2020 -$0.11 -$0.05 52.6% Beat
Q4, 2019 -$0.09 -$0.03 64.9% Beat
Q3, 2019 -$0.09 -$0.01 89.4% Beat
Q2, 2019 -$0.11 -$0.03 73.1% Beat
Q1, 2019 -$0.16 -$0.01 93.7% Beat
Q4, 2018 -$0.19 -$0.19 0% Met
Q3, 2018 -$0.17 -$0.14 19.5% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −3.9%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 4, 2020 $138.83 $133.44 −3.9% Decline
May 7, 2020 $93.11 $96.44 3.6% Increase
February 12, 2020 $90.85 $91.25 0.4% Increase
November 5, 2019 $71.35 $72.30 1.3% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.44, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.44 implies a 0.7% chance of earnings manipulation.

Fundamentals And Technical Analysis

Avalara, Inc. is currently trading at $151.26/share, down −0.3% for the day. The company is trading at approximately 94.5% of its 52-week high of $160.42/share. The company’s stock price is up 13.4% since the last earnings report and down −1.3% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 63.66 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:AVLR Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of −245.70 and a forward P/E multiple of −980.79.

Avalara, Inc.’s current share price also implies a price-to-book (P/B) multiple of 25.07. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $151.26
P/E Ratio −245.7x
P/E Ratio (Fwd) −980.8x
PEG Ratio −7.6
Total Debt / Total Capital 0.5%
Levered Free Cash Flow -$2.074 million
EV / EBITDA −276.9x

Finbox

Avalara, Inc. is a large-cap stock with a market capitalization of $12.673 billion and a total enterprise value of $12.266 billion. The company operates in the Information Technology sector and the Software industry.

Avalara, Inc., together with its subsidiaries, provides cloud-based solutions for transaction tax compliance worldwide. The company offers a suite of compliance solutions that enable businesses to address the complexity of transaction tax compliance; process transactions in real time; produce detailed records of transaction tax determinations; and reduce errors, audit exposure, and total transaction tax compliance costs. The company’s solutions include AvaTax, a solution for determining sales tax in the United States; Avalara Returns for tax return preparation, filing, and remittance; and Avalara Compliance Document Management solution, which creates, validates, stores, and manages sales tax exemption and reseller certificates. It also provides professional services, including nexus studies and analysis, voluntary compliance initiatives, tax registrations, and specialized tax research; MatrixMaster, a product taxability database for retail operations; Avalara CloudConnect, a hardware device for processing and storing transactions on-site for regularly scheduled uploads to AvaTax; Avalara Licensing, an online platform for business licenses and sales tax registrations; VAT Expert, a Web-based solution that checks the validity of customer and supplier value-added tax (VAT) numbers and provides VAT determinations in the form of invoices; and Brazilian tax compliance solutions that address the Brazilian transaction tax regimes through electronic compliance report validation, electronic invoice authentication and preparation, tax determination, and returns preparation; and Avalara Item Classification, a solution that addresses the process of assigning proper country-specific Harmonized System codes to products. The company was formerly known as Advantage Solutions, Inc. and changed its name to Avalara, Inc. in December 2005. Avalara, Inc. was incorporated in 1999 and is headquartered in Seattle, Washington.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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